PNG LPG Supply to Pacific Islands Region. Twinza Oil 1

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1 PNG LPG Supply to Pacific Islands Region Twinza Oil 1

2 Twinza Oil Introduction

3 The Twinza Story

4 Pasca A field Discovered in 1968 and has lain fallow for almost 50 years C-1 C-2 Rich gas-condensate field in a high relief reefal carbonate of Miocene age High resolution 3D seismic has significantly improved the definition of the resource 1 A-3 A-2 Pasca C Advances in offshore engineering and gas processing have significantly reduced development costs Pasca B Pasca A field is capable of very high flowrates enhancing the economics PNG s first offshore development and infrastructure Well located to supply to regional markets Pasca A New 3D seismic data processing offers superior imaging of the Pasca A reef. Both interior and external geometries are seen in higher resolution. Note the terraces visible on the outer surface of the reef. Twinza Oil 4

5 Field Layout Engineering View LPG FSO Central Processing Facility Condensate FSO(Close-Moored) Minimum Wellhead Platform Twinza Oil 5

6 Tonnes per annum Pasca A LPG Production Profile Pasca A - Production of LPG 300, , , , ,000 50, Propane Butane Pasca A LPG production business case sufficient to cover current PNG LPG retail market LPG offtake with be via refrigerated and pressure vessels Approximate 1000 cbm combined daily production Two separate FSOs planned, each for storage of C3 and C4 Ambient pressurized LPG will be supplied to the FSO from production platform Base plan for FSOs to be semi-refrigerated vessels 6 Pasca A will produce 1.8 million tonnes of LPG Twinza Oil 6

7 Energy Landscape: Challenged by Geography & Market size Smaller populations, smaller markets Distant from supply Energy supply chain constraints Exposed to global energy price Support required for affordable & reliable energy Twinza Oil 7

8 Energy use: Petroleum & Biomass dominate, LPG only 2% Source: LPG and Natural Gas as Alternative Energy Sources for the Pacific, Pacific Region Infrastructure Facility, LPG is a very versatile energy source According to the World LPG Association LPG has more than 1,000 applications Home applications Transport applications Recreational applications Agricultural applications Business and industrial applications Twinza Oil 8

9 Regional LPG Movements & Markets Pacific Region mostly supplied via pressure ships out of Brisbane & Sydney Market is > 30,000 metric tons per annum Propane and ~ 50,000 metric tons per annum Butane Twinza Oil 10

10 Pasca A Location A Comparative Advantage (1) LPG Supply from PNG (Pasca A field) Reduces Delivery time to Regional Markets Voyage Duration Saudi Brisbane knots Saudi Sydney knots 4 days voyage BNE POM 5 11 knots Regionally supplied LPG from PNG reduces delivery time to regional markets by at least 30 days Savings in related transport and port costs Twinza Oil 11

11 Pasca A Location A Comparative Advantage (2) Pasca LPG supply is delivered in less time to PNG & Regional Markets. Controlling for ship size, LPG quantity and number of voyages per year, Pasca A LPG shipment takes 117 days round trip to deliver 16k MT LPG to PNG market Similar vessel delivering the same cargo from Brisbane takes 221 days (~180% more days than from Pasca A) Saudi Arabia (Ju Aymah LPG Terminal) voyage to Brisbane takes ~ 29 days Twinza Oil 12

12 Pasca A LPG Production & Regional Demand Profile LPG Storage Capacities indicate market size 13 Twinza Oil 13

13 Thousand tonne per year Pasca A LPG Production & Regional Demand Profile Pasca A LPG Production Sufficient to Supply Region Pasca LPG Production and Total Regional LPG Demand Supply Excess Demand Demand PNG Demand Other South Pacific Demand Australia & Indonesia Note: Australian demand refers to northern Queensland and Nothern Territory markets and Indonesian demand refers to West Papua province. Pasca A LPG production is sufficient to cover project PNG domestic demand & PICTs LPG demand Assume constant demand growth based on economic growth and LPG market penetration 14 Twinza Oil 14

14 LPG Offtake: Demand Profile & Parcel Size 2016 Phase 1 Drilling Understanding specific parcel size crucial for LPG offtake to regional markets Few LPG traders currently dominates regional LPG circulation Understanding anchor off-taker s and their onshore storage requirements is crucial for effective distribution Off-take requirements / parcel sizes, and distribution model will determine sizing of storage facilities ISO containers Small pressure vessels for milk runs through the Pacific Islands Regional LPG distribution is generally straightforward Existing LPG terminals in most islands Only minor site works necessary for ISO containers Bulk LPG movement for power generation will require new terminals and storage hubs Twinza Oil 15

15 LPG A Proven Fuel Source For Electricity Generation LPG a Potential substitute for diesel fired electricity generation Experience in Latin America and Caribbean proved conversion of base load power production from diesel and fuel oil to LPG lowers energy costs while promoting lower carbon emissions ~120 metric ton LPG required to generate 1 MWe per shaft LPG is a good precursor for future gas use in CNG & LNG Twinza Oil 16

16 Fuel Cost (US$/gallon) LPG Market Opportunity Diesel Substitution With LPG in Electricity Generation LPG a Potential substitute for diesel fired electricity generation 7 Alternative Hydrocarbon Fuel Costs (March 2017) Gasoline Diesel Marine Fuel LPG(PNG) LPG(Saudi) Natural Gas Alternative Hydrocarbon Fuels 1. Fuel prices shown are based on Port Moresby & Lae (PNG) prices 2. Natural Gas price is based on US West Coast price ($/GGE) LPG landed cost is a determining factor to enhance cost competitiveness against diesel ~120 metric ton LPG required to generate 1 MWe per shaft Twinza Oil 17

17 LPG Cost Build Up in the PICTs Where the opportunities lie for Twinza to make an impact pricing/cost Saudi Arabia Saudi CP / FOB 1 Freight- VLGC 2 Australia Terminal Charges 3 Freight- Small Ships Port Services Wharfage Local Storage Wholesale Margin Operating Costs Land Transport Retail Margin Retailer / Customer Location Saudi CP/FOBSaudi CP or Terminal other benchmark Charges used to determine Port Services FOB price fromlocal the producer. storage This may be Land a transport benchmark plus or minus Retail charge margindepending on 1 commercial negotiations Twinza Oil 18 4 Local Wholesaler Retail Price Avoided cost due to the proximity to the market. Ras Tanura to Sydney or Brisbane is around 24 to 30 ship voyage days, which is avoided if gas sourced from PNG. Initially, this may be avoided if demand is sufficient for direct transport from upstream FSO to market. Long-term will be via terminals in Port Moresby and Lae. Reducing landed costs of LPG and encouraging increased usage of LPG via diesel substitution will spur increased storage allowing for the retail segment to benefit from improved economies.

18 Way Forward PNG LPG supply to region requires cooperation between producer & off-takers Explore economies of scale in bulk LPG movements to increase domestic household use Engage regional governments on use of LPG in the energy mix of PICTs Develop strategic partnerships Potential anchor customers for LPG in retail, manufacturing & power sectors Regional fuel transporters & infrastructure related constraints Govt. regulator and development partners to increase LPG in regional energy mix Work closely with agencies such as SPC & PRIF to address regional energy aspirations: Liaise on ways to achieve SPC goal of reduced HFO reliance in fuel use Determine enablers for more LPG in energy mix and less reliance on diesel Encourage gas to electricity projects in PICTs countries, starting with LPG A pilot trial in the region is needed to appreciate the opportunities and constraints for the South Pacific region Twinza Oil 20

19 Conclusion Sourcing LPG from PNG advantageous for South Pacific LPG markets Current LPG supplies to Pacific regional markets have significant transport costs & little competition PNG LPG supply potentially reduce transport-related costs for PICTs, LPG distribution to Pacific region requires support from multiple stakeholders Producer, transporter, regional governments, bulk off-takers Success of bulk LPG movements will avail cost effective LPG to consumers in the retail space (economies of scale) Gas to electricity for the PICTs, starting with LPG is a proven concept in archipelagic and distributed markets such as the Caribbean and Indonesia PNG LPG supply addresses PNG and regional energy aspirations: SPC pushing for reduction of heavy fuel oils use within Pacific Island countries Contributing to reduced emissions targets Twinza Oil 21